By Realty Times Staff
Fannie Mae Chairman Franklin Raines is calling on the housing industry to adopt a "Mortgage Consumer Bill of Rights," including a controversial provision urging that consumers "have the right to know what is behind a lender's mortgage decision."
Raines, speaking at the opening session of the National Association of Home Builders annual conference in Dallas said the finance industry must stop hiding behind the cloak of "office policy" when turning down consumers seeking loans.
"Home buyers deserve to know who is making the decision, and how the decision is being made," he told the convention. "They deserve to know what factors go into the decision, and if they can change the decision, and how."
"Taxi passengers, HMO members and consumers across the board are getting their bill of rights. Why shouldn't mortgage applicants, who are making the biggest financial decision of their lives?
"In a time of great change in housing finance, we should protect the gains we've made to earn consumer confidence and satisfaction."
The Home Builder meeting, which attracts some 70,000 participants, is considered the primary convention where builders can see the latest in technology, materials and methods, such as helping families afford homes. Fannie Mae is a large part of that process, having pledged to provide $1 trillion in financing to some 10 million underserved families nationwide, using more than 1,000 mortgage lenders.
The mortgage process, however, continues to be largely misunderstood by the public for lack of information provided by lenders, Raines said.
"The true cost of a mortgage is still one of life's greatest mysteries," Raines said, adding that consumers need to know what they are paying for.
"Not just the down payment, interest rate and points, but all the mortgage insurance, fees, settlement charges and everything they're required to pay in order to get the mortgage.
"Consumers should also know what all these charges really add up to -- the bottom line, out-of-pocket costs, up-front and over time. Consumers need this information in order to compare the cost of various mortgage products on the market, and shop around for the best deal."
Raines also dismissed allegations that Fannie Mae's computerized "Desktop Underwriting System" had become a tool to discriminate against minority and low-income buyers.
He said that by analyzing credit through the system, Fannie Mae found that lower-income families have credit histories as strong as wealthier families.
"As a result, we boosted our financing for low- and moderate-income home buyers," he said. "We can also use a strong credit history to balance off the need for a large down payment.
DU has "allowed us to finance loans with down payments as low as 3 percent, and expanded our purchase of these loans by almost 40 times during the 1990s.
"DU also helps break down the racial barriers to home ownership. It eliminates any explicit bias, since the computer doesn't know the applicant's race. And for a long time, high down payments were a huge barrier to minority home buyers, and DU helped break it down."
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© Copyright 2000 by Realty Times. All Rights Reserved.